Tucson Real Estate Blogs » Housing Market and Predictions

Tucson Real Estate & Golf Properties

Douglas Trudeau , Assoc. Broker
Prudential Foothills Real Estate
64 N. Harrison Road, Suite 160
Tucson , AZ 85748
Mobile: 520-954-2209
Contact Me

Housing Market and Predictions

Predicting the housing market is a combination of subjective and objective evaluations. It’s like looking into a crystal ball.

Subjectivity

From Wikipedia, the free encyclopedia

Jump to: navigation, search

In reason, subjectivity refers to the property of perceptions, arguments, and language as being based in a subject’s point of view, and hence influenced in accordance with a particular bias. Its opposite property is objectivity, which refers to such as based in a separate, distant, and unbiased point of view, such that concepts discussed are treated as objects.

Dusting off one of my graduate books I found some interesting formulas. One was the least-squares regression model for pricing homes. A strictly objective means of evaluation.

P=f(SQFT, BED, BATH, POOL)*

*Business Fluctuations – Forecasting Techniques and Applications, 2^nd Edition, Dale G. Bails and Larry C. Peppers.

Ah, memories of using the regression model in forecasting. What it does not take into consideration is location, existing sales, quality of fixtures, condition, parking, and a myriad of other factors.

Another formula was for seasonal factors.

Yt=B0+B1X1t+B2X2t+B3Q1+B4Q2+…BmQm

Multiple regression models are fine tools for predicting things like manufacturing. How many tires will be needed in 3 years based on today’s auto sales? How many refrigerators will be needed based on new home construction permits? How many light bulbs need to be produced over the next two years based on new home sales? How many disposable diapers will be needed based on number of births?

Tucson Association of Realtors and Multiple Listing Service (TARMLS) changed their method of measuring sales for Tucson and the Metro Area. Excluded are listing sales in the Tucson MLS for homes in Portal, Willcox, Flagstaff and other areas that are not part of Tucson. As such I am researching and updating data pertinent to the Tucson Metro area only. I am going back through 7 years of data to get the best information, so bear with me. I should have it available in a few days.

Rather than using complicated formulas, I prefer to use straight sales data that incorporates cyclical and seasonal data. Though not 100% accurate in predicting future sales, it does provide a guide. That’s all anyone can do. I am not reporting on affordability of homes, strictly sales. This data is based on the old reporting method, but, it gives you an idea.

The housing market is both cyclical and seasonal. Historical cyclical trends have shown us that there have been, are, and will be periods of price increases in a hot market and periods of cooling down following the hot market. We went through a hot market in the Tucson area in 2004 to 2005, with some overspill into 2006. This hot spell in the market was higher than anticipated. Leaving a long cool down period. In my blog Tucson Real Estate On The Move, I related the market to a mile long train that came to a stop, and is now trying to get started again with 3 miles of cars behind the same number of engines. The train hasn’t moved a great distances, but, it is struggling to move, is moving forward and not being drug backward.

Has Tucson bottomed out? We won’t know until the numbers come in showing that we have. Monday morning quarter backing is all anyone can realistically do. The good thing is March, April and May sales in Tucson remained consistent. The problem with the market is that it is susceptible to numerous variables; i.e., job market, interest rates, population changes, etc. Tucson has in its favor an ever increasing population. People coming to Tucson have to live somewhere. Some will rent, some will buy.

California? That’s a different world. The impact California has had on Tucson is the selling of that $800,000 1600 square foot home and buying a $300,000 1,800 square foot home in Tucson. Buyers coming from rural states have a culture shock when arriving here. There are no $50,000 homes. Hence, some will be buyers and others will be renters. I tried building $150,000 spec homes. Vacant lot owners haven’t gripped reality yet. The land market is the slowest portion of real estate recovery. Its not so much the construction costs, its the land costs that are prohibitive.

Seasonally Tucson is in normal summer reduction, not a slump, when looking at the statistics (objective data) it is easy to see the trend. If the numbers are correct, we will see an increase in the fall, with another reduction near the holiday. January should start the rise again toward the better months of March through June. That’s the seasonal rotation of Tucson.

Other parts of the country depend on what has historically happened there. Some parts of the country are in the hot cyclical rotation. There will be a cooling off period there as well. Its just a matter of time. When forecasting the future of the housing market in Tucson its difficult to predict. All one can do is look at the past and try to predict the future. There are the neigh-sayers of doom and gloom who would argue with what I say. I challenge them to make and post predictions based on their knowledge, subjectivity and objectivity.

If you are looking to buy in Tucson my Home Buying 100 series will guide you through the process:

This entry was posted on Monday, June 25th, 2007 at 8:55 am and is filed under Tucson Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Wayne Gretsky’s Puck…

I always include a quote in my weekly newsletter.� In fact, the rest of the newsletter revolves around it in some way.� The quote I used this week has been eating at my brain (and starving) all day.
A good hockey player plays where the puck is.� A g…

June 26th, 2007 // Making Life Work for You
Making Life Work For you - Thank you. Read your blog, nicely put. I recommend others read it.

June 27th, 2007 // Doug Trudeau